Let me start by saying that I am in no way an expert on finances, but I have learned a lot in the past few years as my husband and I strived to get back to our feet whenever we have failed in money matters.
I’ve also listened to many work-at-home moms (WAHM) like me and learned a lot from them about how to manage finances wisely.
How WAHMs earn
There are two typical types of WAHMs: A WAHM who has a full time online job, which means she has committed to work 40 hours a week, possibly logging in 8 hours daily and receiving salary on a regular basis; or a freelance WAHM who takes on jobs on a per project basis, working flexible hours, and getting paid a fixed amount for a project.
The dynamics of the cash flow for the two types of WAHMs are different. I know because I’ve tried my hand at both. Obviously, the one who works 40 hours a week and receives payment regularly has a more stable income and can budget her money accordingly, while the freelancer has to learn to manage her irregular income efficiently to make it work for her and her family.
This is why my first financial tip for WAHMs is this:
1. Go for long term jobs. Look for contractual jobs that pay on a regular basis for at least 6 months. One of the jobs I’ve signed up for has a 6-month contract and ensures payment wired in my account every 15 days.
This arrangement buys me more time to plan my next move once my contract expires and it is not renewed.
2. Save, save, save. The best practice in saving money is still to allot a percentage of your monthly income to it. However, if your income is different every time, this may be a little difficult to maintain. What you can do on months that you can’t afford your goal is to still set aside money no matter how much it is.
Make it a habit to save, especially during good months, so that it comes to you automatically.
3. Don’t celebrate ASAP! Landing a client is great and exciting, and yes, it’s a cause for celebration. Our tendency when we receive our pay checks is to splurge and spend it all. DON’T!
Of your first two monthly payments, first set aside 20% or more. Online jobs can be very unpredictable. One day you have work, the next thing you know, it’s over.
4. Leave the irregular income out of your monthly budgeting. The problem with irregular income is that it often gets delayed. This happened to me so many times before and so I suggest for you to not include “anticipated” income when you budget for your basic monthly expenses, but rather, consider it as an additional income. When you include anticipated income to your budget, you may end up spending more than you can afford for the month that you will have to pay for in the coming months.
5. Don’t use credit card for regular purchases. I’ve read so many times before that credit cards can make you feel that you have more money than you can afford to spend. I never really understood the value of this warning until I experienced the consequences of it myself. We used to pay for our monthly groceries by credit card. At first it was going well for us until two of our children got hospitalized. Without enough cash in hand, we used the credit card to pay for all the medical tests.
It took us a while to pay off our debt which ate into our regular budget. My husband had to go to the bank and request for a payment scheme that we can afford to follow through, and had our credit card deactivated for the time being.
Most people expect to pay their credit card bills when their next salary comes in; in reality, you are borrowing money. You’re not spending the money you have but spending the money you think you’re going to receive.
6. Don’t buy a house or car unless you’re sure you can pay for it It’s easier now to buy a house or a car because of lower amortization rates and doable payment schemes; but just like a credit card, you will end up with a loan. Only this time, your loan is bigger, and more difficult to pay if you are only relying on your monthly income for it.
Save money first and start on small investments. Consult a trusted finance specialist and ask for guidance on how you can achieve your financial goals.
When a friend of mine from Sun Life came over to our house to talk to me and my husband, she didn’t push us to apply for any of the plans right away. We discussed our cash flow and financial obligations, and she asked us what our goals are in the next ten years. Then she gave us proper advice on what to do and what investment plans may be suitable for us to work on.
7. Don’t quit on a regular source of income right away Let’s face it, it’s not easy to concentrate on work while juggling chores and looking after young children. Having difficult and demanding clients don’t make it any easier to resist the urge to quit your job. I have talked to so many WAHMs who are on the brink of giving up their clients because of the physical and emotional stress they go through.
But time has proven over and over again that making a decision when you’re at the height of your emotions can lead to bigger financial troubles. I quit a good-paying job without any backup out of exhaustion, frustration, and a desire to work on flexible hours. While my plan was workable, my timing was bad. My decision to quit without a guaranteed backup job made it hard for us to keep up with our monthly rent and bills. It’s a lesson that I take with me now that I found a set of regular-paying clients again.
Work has value The competition for well-paying online positions with reasonable work load is stiff, especially if you’re a writer like me. The truth is that no matter how good you are in what you do, there are others who have the same set of skills as you.
Focus on your priorities. Value your source of income and be thankful for it. If your job is not the right fit, the least you can do is to plan your transition well. If you’re tired, take a break, but manage your money and save, save, save!
Image used under Creative Commons from Karolina Grabowska